Every team receives a sheet with specific instructions
Fair play
No team is being manipulated – no boobytraps
Just remember: the more serious you play, the higher the gain…
Round 1: 30 minutes to prepare with your subgroup
Round 1: 30 minutes to prepare with your subgroup
State/define your position
Initiative for 1st meeting taken by Workout Firm
Round 2: maximum of 30 minutes to come to a standstill agreement
Round 3: 90 minutes to come to a written workout agreement
Active attitude by management and shareholders
Active attitude by management and shareholders
Seeking help from professional advisors
Adequate operational turnaround measures [fixing the business]
Transparency with regard to financial situation
Injection of risk-bearing capital
Involvement of financiers (major financial and trade creditors)
Confirmed by (among others): R3 research (UK), Slatter & Lovett (London Business School) and Franks/Sussman (UK)
Principal banks putting pressure on management [tension]
Unsecured creditors cannot be convinced and yet refuse to take “haircut” [holdout problem]
Investors only interested under unfavorable conditions
Shareholders and potential investors not agreeing on sales price
Principal bank canceling financing
Uncontrolled “race to collect” started by creditors [frustrations among creditors]
Problems becoming publicly known leading to “self-fulfilling prophecy”
Conflicts with service providers and suppliers on payment terms
Emergency loans necessary yet shareholders and banks refusing
“Signaling” of shareholders by not injecting additional finance [no trust anymore]
“Skeletons in the cupboard” leading to pressure of potential investors towards liquidation
Passive attitude management and shareholders
Passive attitude management and shareholders
Started too late; “too little, too late”
Need for strategic redirection not seen
No speedy and adequate operational restructuring
Lack of turnaround planning based on vision, strategy, operational and financial planning
Too much focus on costs instead of sales
No indications of methodical approaches towards turnaround
Important stakeholders not involved
Banks badly informed
Important suppliers/vendors ignored
Insufficient transparency regarding financial situation and proposed reorganization
MIS is disaster
Lack of attention with regard to steering on financial key performing indicators
Not enough efforts towards bringing in risk-bearing capital (equity)
Too much focus on additional debt and/or workout agreements with (unsecured) creditors
Need for additional equity not seen by management
Frustrations and loss of trust
Not enough attention on negotiation and communication
No improvement in operational (financial) results
Why is communication needed? With whom?
Why is communication needed? With whom?
What is good communication?
Harvard negotiation framework
Harvard negotiation framework
[People] Adopting a problem-solving approach and not allowing personality differences to side-track this [dealing with frustrations]
[Interests] Avoiding taking and defending positions but rather concentrating on parties’ respective interests [enlightened self-interest]
[Options] Before making decisions, generating as many options as possible, particularly those creating mutual benefit [tailor made solutions]
[Criteria] Establishing objective and fair criteria for a resolution, rather than the judgment of either party [sophisticated turnaround plan – commercially viable future - root causes addressed]
Consciousness must be present with regard to “feelings, emotions, frustrations” of stakeholders involved
Consciousness must be present with regard to “feelings, emotions, frustrations” of stakeholders involved
Resolving financial distress has a great way to do with:
Communication
Frustrations
Dealing with fear of losses at various parties involved
Harvard principle 1: deal with human factor first, then move on
Negotiations often take place one-on-one
Important to focus on common interest of company, individual creditor and other creditors
Interests are related
Harvard principle 2: “pull” parties out of positions and show them
what is to be gained for all
Fact: companies in distress lack money
Fact: companies in distress lack money
Yet, various options always available between direct payment and debt write-offs [“workout”]
“Opportunism” to be avoided; specifically with regard to tendency to have unsecured creditors footing the bill
Harvard principle 3: always look for various options to choose from by creditors
“Company viability” is a subjective fact
“Company viability” is a subjective fact
Holistic turnaround plan needed as basis for negotiations
Operational action plan – detailed operational plan of attack
Financial prognostications – profit & loss-, and cash forecasts
Time scheme – timetable + milestones
Risk analysis – best & worst case scenario, and risk reward ratio
Summary – `to the point` outline (e.g. for bankers steering committee)
First of all, try to create a standstill and with that stabilize the situation (“informal moratorium”)
First of all, try to create a standstill and with that stabilize the situation (“informal moratorium”)
Agree about “fresh money” and how to deal with it in case the company collapses anyway (“loss-sharing agreement”)
Try to generate as many options as possible before deciding on solutions
Make information transparent for all
Be aware of fact that some stakeholders in practice have more power than strictly based on their legal positions
Create a negotiation atmosphere based on mutual trust and respect
Keep a close eye on legal positions: do not try to put stakeholders in a worse off position as compared to their legal status
Use Harvard Negotiation principles and INSOL Statement to help guide negotiations and to create some kind of “informal rules” (framework)
Make sure the company works on a turnaround plan (“fixing the business”)
Use a little bit of humor… (indeed, research shows it helps in difficult situations)
Rotterdam Science Tower
Marconistraat 16, 12th floor
3029 AK Rotterdam
The Netherlands
tel +31 (0) 10 204 56 70
fax +31 (0) 10 204 55 55
jan.adriaanse@turnaroundpowerhouse.com
www.turnaroundpowerhouse.com
Where a debtor is found to be in financial difficulties, all relevant creditors should be prepared to co-operate with each other to give sufficient (though limited) time (“stand still period”) to the debtor for information about the debtor to be obtained and evaluated and for proposals for resolving the debtor´s financial difficulties to be formulated and assessed, unless such a course is inappropriate in a particular case
Where a debtor is found to be in financial difficulties, all relevant creditors should be prepared to co-operate with each other to give sufficient (though limited) time (“stand still period”) to the debtor for information about the debtor to be obtained and evaluated and for proposals for resolving the debtor´s financial difficulties to be formulated and assessed, unless such a course is inappropriate in a particular case
During the standstill period, all relevant creditors should agree to refrain from taking any steps to enforce their claims against or (otherwise than by disposal of their debt to a third party) to reduce their exposure to the debtor but are entitled to expect that during the standstill period their position relative to other creditors and each other will not be prejudiced
During the standstill period, all relevant creditors should agree to refrain from taking any steps to enforce their claims against or (otherwise than by disposal of their debt to a third party) to reduce their exposure to the debtor but are entitled to expect that during the standstill period their position relative to other creditors and each other will not be prejudiced
During the standstill period, the debtor should not take any action which might adversely affect the prospective return to relevant creditors (either collectively or individually) as compared with the position at the standstill commencement date
During the standstill period, the debtor should not take any action which might adversely affect the prospective return to relevant creditors (either collectively or individually) as compared with the position at the standstill commencement date
The interests of relevant creditors are best served by co-ordinating their response to a debtor in financial difficulty. Such co-ordination will be facilitated by the selection of one or more representative co-ordination committees and by the appointment of professional advisors to advise and assist such committees and, where appropriate, the relevant creditors participating in the process as a whole
The interests of relevant creditors are best served by co-ordinating their response to a debtor in financial difficulty. Such co-ordination will be facilitated by the selection of one or more representative co-ordination committees and by the appointment of professional advisors to advise and assist such committees and, where appropriate, the relevant creditors participating in the process as a whole
During the standstill period, the debtor should provide, and allow relevant creditors and/or their professional advisers reasonable and timely access to, all relevant information relating to its assets, liabilities, business and prospects, in order to enable proper evaluation to be made of its financial position and any proposals to be made to relevant creditors
During the standstill period, the debtor should provide, and allow relevant creditors and/or their professional advisers reasonable and timely access to, all relevant information relating to its assets, liabilities, business and prospects, in order to enable proper evaluation to be made of its financial position and any proposals to be made to relevant creditors
Proposals for resolving the financial difficulties of the debtor and, so far as practical, arrangements between relevant creditors relating to any standstill should reflect applicable law and the relative positions of relevant creditors at the standstill commencement date
Proposals for resolving the financial difficulties of the debtor and, so far as practical, arrangements between relevant creditors relating to any standstill should reflect applicable law and the relative positions of relevant creditors at the standstill commencement date
Information obtained for the purposes of the process concerning the assets, liabilities and business of the debtor and any proposals for resolving its difficulties should be made available to all relevant creditors and should, unless already publicly available, be treated as confidential
Information obtained for the purposes of the process concerning the assets, liabilities and business of the debtor and any proposals for resolving its difficulties should be made available to all relevant creditors and should, unless already publicly available, be treated as confidential
If additional funding is provided during the standstill period or under any rescue or restructuring proposals, the repayment of such additional funding should, so far as practical, be accorded priority status as compared to other indebtedness or claims of relevant creditors
If additional funding is provided during the standstill period or under any rescue or restructuring proposals, the repayment of such additional funding should, so far as practical, be accorded priority status as compared to other indebtedness or claims of relevant creditors
